Reflections on regulation: Experience and the future

Today the ASI publishes a new report, Reflections on Regulation: Experience and the Future (PDF). The report features articles by five former regulators with diverse industry experience – Stephen Littlechild (electricity), Ian Byatt (water), Chris Bolt (railways), John Swift (railways) and Graham Corbett (post). Tim Ambler, an academic who has studied this area extensively, summarizes and offers a number of different paths that regulation may take in the future. ASI Director Eamonn Butler has a summary, outlining his own thoughts on the future of regulation.

The rise of utilities regulation took place in the 1980s, as the Thatcher government’s attempt to ease the teething troubles of newly-privatized sectors. It was the most politically feasible way of implementing widespread reform – fears that a privatized state monopoly would simply be a private monopoly abounded, and the promise of some state oversight to prevent abuse soothed many troubles. My own feeling is that, while regulated capitalism was a definite step up from state socialism, we have moved past this and it is time to start disassembling the government’s regulatory framework and encouraging self-regulation, one of the paths that Tim Ambler suggests.

Self-regulation isn’t as toothless as it sounds. Many firms rely on their reputation for their success – think about how generous food companies are when you find a hair in a tin of baked beans – and there is every reason to think that, in the absence of a state regulator, firms would set up an independent regulator to monitor their activities and vouch for them to consumers. And any companies acting fraudulently or otherwise illegally could still be met with the full force of the law – the idea that getting rid of regulators would mean that companies would be allowed to lie to consumers is, simply, wrong.

Today’s report offers insider perspectives on the regulatory industry, with an interesting discussion of the roads that the government could take as it tries to reform the sector. What needs to be removed is the attempt to plan or engineer competition: competition can’t be designed, it can only happen organically and spontaneously.